Poland: FM Guidance On Equalization Relief

This is to let you know that the Finance Ministry ("FM") has published Guidance of 10 August 2021 on the equalization relief under Article 27g of the Personal Income Tax Act (Journal of Laws of 2021, item 1128, as amended; the "Guidance").

As explained in the Guidance, the equalization relief (ulga abolicyjna):

• is available only to taxpayers who are residents of Poland for tax purposes,
• applies only to income which is:
• derived abroad, meaning from sources outside the territory of Poland (foreign income), and
• taxed in accordance with the ordinary credit method;

• applies only to income from the following sources:
• employment (including government service, cooperative employment and outwork);
• personal services,
• sole proprietorship (except for farming),
• copyrights and related rights (as defined in dedicated laws), foreign activities of artistes, writers, academics, educators and journalists, except for income from use or disposal of such rights;

• is not available for income derived in tax havens;
• operates without the limit (now PLN 1360) applicable to income from employment or services performed otherwise than on land from the following sources:

• employment (including government service, cooperative employment and outwork);
• services provided under a contract for services or for specific work, if received solely from a sole proprietor or a legal person or its organisational unit or an unincorporated organisation (except for income under contracts made in course of taxpayer's solo business other than farming);
• income under business management, executive or similar contracts, including if such contracts are made in course of taxpayer's solo business other than farming (except for income received by persons howsoever appointed to management boards, supervisory boards, committees or other decision-making bodies within legal persons).

MF also noted that the equalization relief applies on an annual basis in the annual tax preparation and must not be included in the computation of any advance tax payments during the year.

See the link below for the full text of the Guidance (in Polish):

https://www.gov.pl/web/finanse/objasnienia-podatkowe-z-dnia-10-sierpnia-2021-roku-dot-ulgi-abolicyjnej-o-ktorej-mowa-w-art-27g-ustawy-o-podatku-dochodowym-od-osob-fizycznych

If this issue pertains to your business and you are interested in our assistance, please contact your WTS&SAJA consultant.